A state consumer protection agency preliminary investigation into the propane gas business in Connecticut -- launched as the result of Watchdog columns -- has concluded that many companies mislead their customers, charge improper fees, may violate antitrust laws and make record profits.

The most startling point is that propane companies on the East Coast increased their profit margin by 54 percent this heating season over the previous heating season.

The 11-page report, provided to me on Friday by Consumer Protection Commissioner Jerry Farrell Jr., states that the department's analysis of average wholesale and retail prices shows that in past years the most the industry was able to increase its annual profits was by 13 cents a gallon, or 15 percent.

The latest increase, however, was 67 cents a gallon over the previous year.

The report includes a letter Farrell sent to state Attorney General Richard Blumenthal last month, urging him to investigate industry practices that may constitute illegal antitrust activities.

Blumenthal is investigating and is also working with the propane industry association to propose legislative changes to protect consumers from unscrupulous practices by some dealers.

Farrell said last week that his report should not be taken as an indictment of every dealer because his investigation has been limited, but it will continue.

I agree. There are propane dealers who run their businesses honestly. I have heard good things from customers about Uncas Gas in Franklin and Spicer Gas in Groton. If you are pleased with your propane company, please let me know, and we can together establish a list of firms that deserve your money.

Although most people in Connecticut heat their homes with oil, natural gas or electricity, as many as 300,000 use propane for heat, cooking, or for their fireplaces. Of those, only 4 percent own their own tanks; and the remaining 96 percent rent them from their propane dealers.

My investigation -- backed up by Farrell's findings -- point to dealer ownership of tanks as the source of virtually all of the abuses.

It is a nationwide problem. I have received complaints from homeowners in Massachusetts, Virginia, New York, Colorado and Pennsylvania.

The attorney general in Michigan recently brought suit against one of the largest propane companies, Inergy Propane, which also owns firms in Connecticut that have numerous complaints against them.

Propane companies have been able to hold their customers hostage by making it difficult for them to buy their own tanks and by convincing fire marshals throughout the country that only the owners of tanks should be allowed to fill them.

The first stage of Farrell's department's investigation focused on the 93 complaints his department received in the past year against 16 of the approximate/ly/ 40 propane companies operating in Connecticut.

The complaints, the report states, point to these improper practices:

Low introductory prices -- much lower than the average -- combined with an exaggeration of the cost of owning and maintaining of tanks lead many to sign five- to seven-year contracts to rent company tanks.

The introductory prices evaporate, and locked-in customers are then charged prices much higher than the average and are assessed new fees.

Contracts are written vaguely to permit companies to change terms.

Contract terms are amended on invoices or delivery tickets.

Customers wishing to change companies are assessed large fees for the removal of dealer-owned tanks.

Customers wishing to buy leased tanks are charged for what a new tank costs, even if their tanks are is old and the customer has paid for it many times over in rental fees and higher propane bills.

Customers who complain can get a 70-cent or more reduction in their price, an indication that they've been overcharged.

The report also focuses on unsuspecting home buyers who are unaware that their new home has a rented tank and a contract that they must adhere to. Next Sunday, I will detail one case in Glastonbury, the home town of Bemer's Gas, a company that has 10 complaints against it with the agency.

Connecticut real estate law does not require the seller of a home to disclose that the propane tank is rented, nor is there a requirement that the contract be disclosed. That needs to be changed, Farrell's report states.

"The ownership of the tank is presently not clear-cut to the consumer in any way; we would like to see it made clearer to the consumer, either through saying that the tank becomes the property of the landowner after a certain number of years, or some very serious up-front disclosures to the consumer about the tank being owned by the company and what alternatives the consumer has to that situation," Farrell said.

"Right now, unless the consumer asks a lot of questions, they are not put into a position to make educated choices; we need to move the issue of ownership more into 'the light of day,' so every consumer knows and understands what their options are and what positives and negatives follow," he said.

I urge both Blumenthal and Farrell not only to continue their investigations in Connecticut, but also to work with their counterparts in the rest of the country to shed light on this issue and to make changes nationally.

Consumers need to do their part, also. With computers and the Internet, consumers have no excuse not to educate themselves on energy issues, including whether they are paying fair prices.

Frankly, I am stunned by how many complain about a 25-cent increase in gasoline prices, but allow unscrupulous heating oil and propane companies to pick their pockets for hundreds of dollars a year by charging much higher rates than their competitors.

4 Comments

I live in NW Pa. (snow~belt) and have an annual income of just about 1/2 the `poverty` level. FerrellGas charges me $2.42 per gallon. Then I am charged a HazMat fee of $5.99 and then a fuel surcharge fee of $5.999. I thought those had been deemed `illegal` or not allowable.
The company also has a sliding scale to charge different customers different prices per gallon, depending on their `annual` usage.
I `contract` 800~900 gallons (for the year) but cant afford more than maybe $200~300 above my LIHEAP (Energy assistance) will cover, for the entire year.
I am physically disabled and cold isn`t my friend, AT ALL.

I have to keep my home at 60 degrees (at most) with ALL room doors closed. My downstairs has been as cold as 40 degrees, the bathroom 46 degrees and heating only the livingroom and kitchen I use about 200 gallons a month (about 5% a week). I also DO NOT use the furnace, as it would cost me 3~4 times what it does now. I use 2 propane space heaters (intermittently) and 2 electric heaters (intermittently) to supplement.

To fill the 500 gallon tank to 80% (400 gallons) will cost $1,129.33, which includes the above EXTRA fees.

On Dec.15,2008, I had the tank topped, 161.9 gallons which cost $391.80 plus $5.99 plus $5.999. A total of $403.79.
Since then, I have used around 200+ gallons @ 5% per week (about 25~30 gallons per week). Ironically, gasoline cost $1.75 per gallon then.

This is my main heating source, which I have had to supplement with electric. Which, by the way, is cheaper than propane, now. Good thing I have been unable to use my stove (propane) for the past 2~3 years. My hot water is also propane.....so that`s used sparingly and turned down to `vacation` setting.
I`ve spoken to others who pay as little as $1.75 per gallon. This year has been much closer to our `normal` winters of years past. Temps from 20 to 30 below, with wind chills. I do figure, `the more snow, the more `insulation` for my home.

So I dress is 2~3 layers of warm clothes and hope the pipes downstairs don`t freeze. I have been told by people who are supposed to help me find resources, to sell my home (which is paid for) and move to cheaper housing.

I lost my main disability income 8 years ago, due to a misrepresentation by the FEDERAL govt. ALL my doctors, including specialists, agree I am and will remain `permanently disabled, un~employable. However, DONT help me get that back!!!!! It`s been my fight alone, these past 8 years. These `people` could help, but can`t be bothered.

Forget the `politicians`help with any of this, too. They are worthless. on sooooooo many levels.

Good to see some action on this issue. As a propane user, with a 1000 gal. tank buried in my yard, have had a front seat on this roller coaster since we built our house in 2003. At first, paying the nominal premium per gal. was not an issue. The company was locally owned and pricing was competitive as I had vetted them prior to signing. Unfortunately, in 2007 my local propane supplier was purchased by Inergy. While the level of service remained very high, unfortunately their prices began to skyrocket.

I experienced the phone call questioning why my per gal. rate was more than $1.00 over the state average only to have a rebate issued without question. Of course, this still did not cover the delta. Then, this October I got the grandaddy of all shockers, a bill at $4.279 a gallon (this was the first fill of my tank since May). Well, more phone calls and more price adjustments until the Inergy branch manager (he was a good guy and I hope they keep him)indicated that many of their customers were buying the tanks out from them and then shopping the market. So that's what I did. Of course, I paid what a new tank would cost even though mine had been in the ground for 5 years. Anyway, its a quick ROI and I calculate that I have made my money back the next time I fill it.

My gut feeling, if you read the report to the Atty General, is that you can most likely draw a strong correlation to the increase in margin to the acquisition of local propane suppliers by the large suppliers. I know that Inergy is running around buying up many of the local companies. As long as the practice of allowing only the owner of the tank to fill it is allowed, then barring regulation, the big fish will eat the little fish and the consumer will pay.

I have been having a terrible time with Suburban Propane in upstate New York (Columbia County). We have been getting deliveries even after we have stopped automatic delivery -- with no ticket or invoice left behind. We only recently discovered another 225 gallon delivery (while we were at the house even!) when we called to confirm a credit when they readjusted our price per gallon from the previous two deliveries. They had been charging us a dollar a gallon more before we called them on the prices.

We have been extremely suspicious of their records and their deliveries, as the usage is exorbitant and inconsistent with similar properties (over 1000 gallons in 10 weeks for a weekend house). Our gauge was showing full capacity when they decided to schedule the latest delivery of 225 gallons (out of 500) and it remained the same after they had purportedly fueled up.

When we called to complain about these erratic and inconsistent deliveries/records, we were met with lies, and eventually, attitude, and threats that our house would "freeze up in 3 days" if we stopped delivery. Their true intentions were revealed when they called up our real estate agent to "alarm" them about our cancelling service (which we had not done), and subsequently told me they had a long account with the owner they were interested in protecting. The previous renter had a similarly bad experience with them and actually used another provider.

This whole affair has left a bad taste in our mouths and we are now shopping around for a new propane provider. Even as we do so, we're nervous that we would simply switch from bad to worse, given their reputations.

If anyone has some positive experiences with particular propane companies in my area, I'd gladly take any recommendations.

The new fee that I saw was the charge to train the drivers in accordance with the Homeland Security Law.

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